What You Need to Know About the Federal Open Market Committee Meeting

Interest Rates Will Remain Low Until 2023

FOMC Chair Jerome Powell
••• Photo by Chip Somodevilla/Getty Images 

The Federal Open Market Committee (FOMC) holds eight meetings per year. Its most recent meeting was Nov. 4-5, 2020. During the meeting, the FOMC maintained its target for the fed funds rate at a range of 0% to 0.25%. Read on to learn what else happened at the most recent meeting, summaries of past meetings, and what it all means for you.

What Does the FOMC Do at These Meetings?

At four of its eight meetings, the FOMC issues economic forecasts. The FOMC executes open market operations for the Federal Reserve System, the U.S. central bank. Its goal is to promote maximum employment, stable prices, and moderate long-term interest rates.

The FOMC influences interest rates when it changes the fed funds rate. This is one of the most important leading indicators. It tells you which way the economy will go. If the rate is raised, it increases the cost of home mortgages, loans, and credit cards. As fewer loans are taken out, it slows economic growth. The opposite occurs when the rate is lowered.

Interest rates are at record lows in response to the COVID-19 pandemic. Expect them to remain that way through 2023.

The meeting minutes give you a high-level analysis of the U.S. economy. That makes them useful to read even if the FOMC doesn't change interest rates. The stock market often reacts immediately to FOMC meetings, announcements, and minutes.

Learn more about this year's meeting schedule, as well as what has unfolded at the most important FOMC meetings since June 2013.

What Happened at the Most Recent 2020 Meeting

Nov. 4-5: The FOMC maintained its target for the fed funds rate at a range of 0% to 0.25%. It would continue its quantitative easing (QE) program, increasing purchases of U.S. Treasurys and mortgage-backed securities if needed. It would continue overnight repurchase (repo) agreement operations. It promised to continue these programs until inflation rose above 2% and long-term inflation expectations were "well anchored" at 2%. It also wants to support maximum employment.

Expect short-term interest rates, such as those for adjustable-rate loans, to remain at current levels for the next two to three years.

2020 FOMC Meeting Schedule and Summaries

The last 2020 FOMC meeting will be Dec. 15-16. The Fed will issue new forecasts.

Most of the FOMC meetings in 2020 responded to economic threats posed by the COVID-19 pandemic.

Sept. 15-16: The FOMC maintained its target for the fed funds rate to a range of 0% to 0.25%. It would continue its QE program and overnight repurchase (repo) agreement operations.

This was the first time the FOMC released a forecast through 2023. In it, the Fed forecast inflation remaining below 2% until 2023. The annual unemployment rate is expected to be 7.6% in 2020, dropping every year until it reaches a median rate of 4.0% by 2023. It is projected to be 5.5% in 2021, and 4.6% in 2022. As a result, the fed funds rate won't be raised through 2023.

Aug. 27: The FOMC announced updates to its Statement on Longer-Run Goals and Monetary Policy Strategy. It will now focus more on addressing unemployment than on containing inflation. It will allow inflation of more than 2% if that will help ensure maximum employment. It still seeks an inflation target of 2% over time but is willing to allow higher rates if inflation has been low for a while.

July 28-29: The Committee said it would use its full range of tools until it is "confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals."

June 9-10: The Fed maintained its target for the fed funds rate to a range of 0% to 0.25%.

April 28-29: The FOMC announced it was committed to using its full range of tools to support the economy. It kept the fed funds rate at a range of between 0% and 0.25%.

March 23: The FOMC held an emergency meeting to expand credit. The Fed expanded its QE program to an unlimited amount. It also included purchases of commercial mortgage-backed securities. It expanded its overnight repo program. and allowed banks to decrease their capital levels. That would give them more funds to lend to those hit hard by the COVID crisis.

At the meeting, the Fed also established two funds to support corporate bond lending. The Primary Market Corporate Credit Facility (PMCCF) is for new bonds and the Secondary Market Corporate Credit Facility (SMCCF) is for existing bonds.

The Fed revived the Term-Asset Backed Securities Loan Facility (TALF). It supports credit for asset-backed loans such as student and auto loans, credit cards, and Small Business Administration (SBA) loans.

It expanded the Money Market Mutual Fund Liquidity Facility (MMLF) to support municipal bonds. The Commercial Paper Funding Facility (CPFF) allows high-quality, tax-exempt commercial paper to be considered eligible securities.

The Fed announced it will create a Main Street Business Lending Program (MSBLP) to support lending to eligible small-and-medium-sized businesses, complementing efforts by the SBA.

March 15: The FOMC held an emergency meeting to lower the rate to a range of between 0% and 0.25%. It revived the QE program. It promised to purchase $500 billion in U.S. Treasurys and $200 billion in mortgage-backed securities over the next several months.

The Fed took the unprecedented move of reducing the reserve requirement ratio to 0.

The FOMC took these actions to encourage banks to lend out all of their funds during the pandemic.

March 3: The Committee lowered the fed funds rate by a half a percentage point to a range of between 1.0% and 1.25%.

Jan. 28-29: The FOMC left the fed funds rate at its targeted range of between 1.5%-1.75%. It was satisfied with pre-pandemic rates of economic growth, inflation, and unemployment.

2019 FOMC Meetings

The FOMC, concerned about slowing growth, reversed course and switched to expansionary monetary policy in 2019. It lowered interest rates three times.

To increase transparency, FOMC Chairman Jerome Powell began holding a press conference after every meeting. This transparency is called forward guidance, and it is also one of the Fed's tools. The Fed has so much influence that it can manage the economy by simply telling the public what it plans to do.

Oct. 29-30: The FOMC lowered the target fed funds rate to a range between 1.5% and 1.75%. It was concerned that inflation was below its 2% target.

Sept. 17-18: The Committee lowered its benchmark rate to a range between 1.75% and 2.0%.

July 30-31: The Committee lowered the fed funds rate to a range between 2.0% and 2.25%. It was the first rate cut since December 2008. It paused reducing its $3.8 trillion in holdings of securities amassed during QE.

2018 FOMC Meetings

In 2018, the Chairmanship passed from Janet Yellen to Jerome Powell. The March 20-21 meeting was Powell's first as Chair. He has been a Fed Board member since 2012.

The FOMC raised the target range for the fed funds rate four times. It was encouraged by strong economic growth, low unemployment, and an inflation rate that was near its target of 2%.

Dec. 18-19: The Committee raised the rate to a range of between 2.25% and 2.5%. Strong job gains and household spending encouraged the Fed to continue normalizing interest rates.

Sept. 25-26: The Committee raised the rate to a range between 2.0% and 2.25%. Strong economic growth allowed the Fed to normalize interest rates.

June 12-13: The FOMC raised the fed funds rate to a range of between 1.75% and 2%. It was encouraged by stable economic activity, strong labor market conditions, and inflation near its 2% target.

March 20-21: The Committee raised the fed funds rate to a range between 1.5% and 1.75%. It believed the economy was strong and inflation would soon reach its target goal of 2%. This was Powell's first meeting as Fed Chair.

Jan. 30-31: This was Fed Chair Yellen's last meeting. The Committee left the fed funds rate between the range of 1.25% and 1.5%. It announced it would allow $12 billion of Treasury securities to mature each month without replacing them. It would do the same with $8 billion of mortgage-backed securities. This meant the FOMC suspended new QE purchases. It would no longer add to its balance sheet.

2017 FOMC Meetings

The FOMC raised the target for the fed funds rate four times. It also continued to reduce its holdings of Treasury securities, acquired during QE, as they matured. Committee members were encouraged by strong economic growth despite an unusually harsh hurricane season.

Dec. 12-13: The Committee raised the fed funds rate to a range between 1.25% and 1.5%.

June 13-14: The Committee raised the fed funds rate a quarter of a percentage point to a range between 1% and 1.25%. It said the economy and employment were growing steadily.

The FOMC also announced how it would reduce the $4.5 trillion in QE securities it held on its balance sheet. It would allow $6 billion of Treasurys to mature each month without replacing them. Each month it would allow another $6 billion to mature until it's retiring $30 billion a month.

The Fed announced a similar process with its holdings of mortgage-backed securities. It would increase increments of $4 billion per month until it was retiring $20 billion per month. 

March 14-15: The Committee raised the fed funds rate to a range of between 0.75% and 1%.

2016 FOMC Meetings

The FOMC kept rates the same until the December meeting. In its April 27 meeting and after, it was concerned about weak exports, consumer spending, and business investment. It expected inflation would rise to its 2% target "in the medium term." It expected the fed funds rate will remain low "for some time." Once it began to raise rates, it would do so "gradually." It maintained this caution throughout the year.

Dec. 13-14: The FOMC raised the fed funds rate by a quarter of a percentage point to a range of between 0.5% and 0.75%. It was satisfied with the rate of economic growth and expected inflation to reach its 2% target in the near future.

2015 FOMC Meetings

The FOMC, assured that the recession was over, reversed course and began imposing contractionary monetary policy to prevent inflation.

Dec. 15-16: The FOMC raised the fed funds rate a quarter of a percentage point, to a range between 0.25% and 0.5%. It had been at a range between 0% and 0.25% since Dec. 16, 2008. The Committee promised to continue raising rates in 2016, as long as the economy continued to improve. 

2014 FOMC Meetings

The FOMC didn't change the fed funds rate. It did reverse course and begin reducing its purchases of U.S. Treasurys and mortgage-backed securities.

Oct. 28-29: As expected, the FOMC ended its QE bond purchases. It had almost doubled its holdings of securities, mostly Treasurys and mortgage-backed securities. Its holdings rose to $4.482 trillion from $2.825 trillion in 2008. It would continue purchasing new securities to replace its holdings but wouldn’t increase its holdings. Eventually, once it raised the fed funds rate to 2%, it would gradually reduce its holdings by not replacing them when they matured. 

March 18-19: Yellen's first FOMC meeting as Chair. The Fed would taper another $10 billion a month from its purchases of Treasury notes.

Jan. 28-29: This was Chairman Ben Bernanke's last FOMC meeting. After creating an alphabet soup of programs to fight the 2008 financial crisis, Bernanke's final action to further reduce quantitative easing was a bit of a let-down. The Fed promised to reduce its purchases of long-term Treasurys and mortgage-backed securities by another $10 billion a month. That meant it would only buy $65 billion a month, instead of $85 billion.

2013 FOMC Meetings

Dec. 17-18: The Fed announced it would reverse course and engage in contractionary monetary policy. It would keep interest rates the same but begin tapering QE in January 2014. 

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